News Corp. Blasted In U.K.

Hacking Inquiry Says It Was Misled

By

Paul Sonne And

Jeanne Whalen

Updated May 1, 2012 7:49 p.m. ET

LONDON—A U.K. parliamentary committee report issued Tuesday said News Corp. Chairman and Chief Executive Rupert Murdoch is "not a fit person to exercise the stewardship of a major international company" and found that three former News Corp. executives misled British lawmakers over the depth of the phone-hacking scandal.

The report from Parliament's Culture, Media and Sport Select Committee sketches out details of a coverup the company allegedly carried out as it sought to contain the fallout from revelations that its now-closed News of the World tabloid illegally intercepted cellphone voice mails in pursuit of information.

A U.K. committee investigating the News of the World phone-hacking scandal issued a final report that came down hard on News Corp. chief Rupert Murdoch and accused company executives of misleading parliament. Bruce Orwall has details on The News Hub. Photo: AFP.

Web of Connections

The report had especially harsh words for the 81-year-old Mr. Murdoch—although the rebuke divided members of the committee along party lines. "Rupert Murdoch did not take steps to become fully informed about phone-hacking," according to a passage inserted despite the opposition of Conservative members. "He turned a blind eye and exhibited willful blindness to what was going on in his companies and publications." The corporate culture "permeated from the top," it added.

Three former executives from News International, the company's U.K. newspaper unit, were singled out for misleading Parliament during testimonies on phone hacking in 2009: Les Hinton, a longtime Murdoch lieutenant who served as the unit's executive chairman for 12 years before leaving in late 2007 to head up News Corp.'s newly acquired Dow Jones & Co. unit, which publishes The Wall Street Journal; Colin Myler, the News of the World's editor from 2007 to 2011; and Tom Crone, the tabloid's top lawyer. All three men have left News Corp.

The committee said a number of statements News International executives made in 2009 were untrue, including the claim that illegal voice-mail interception was limited to one reporter and the assertion that phone hacking had been investigated thoroughly by the company. The report says News Corp.'s instinct throughout the affair was to "cover up rather than seek out wrongdoing and discipline the perpetrators."

During a news conference, the committee said all of its 10 voting members supported the report's conclusions about Messrs. Hinton, Myler and Crone. But Conservative Member of Parliament Louise Mensch said the committee's Conservative MPs voted against the final report largely because of the line saying Mr. Murdoch isn't a "fit person" to run a global company. Ms. Mensch said the report should therefore be seen as "partisan."

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It passed with the support of six Labour and Liberal Democrat legislators. Four Conservatives opposed it.

In a statement, News Corp. said: "Hard truths have emerged from the Select Committee Report: that there was serious wrongdoing at the News of the World; that our response to the wrongdoing was too slow and too defensive; and that some of our employees misled the Select Committee in 2009." But it called some of the report's commentary "unjustified and highly partisan."

In an email to News Corp. employees Tuesday, Mr. Murdoch said: "We certainly should have acted more quickly and aggressively to uncover wrongdoing. We deeply regret what took place and have taken our share of responsibility for not rectifying the situation sooner."

Mr. Hinton and Mr. Myler issued separate statements on Tuesday rejecting the committee's findings about their behavior and saying they had been truthful in their testimonies. Mr. Myler, now editor in chief of the New York Daily News, said, "I have always sought to be accurate and consistent in what I have said to the committee."

Mr. Crone also denied giving misleading evidence and said the report exhibited "serious flaws" and didn't fully reflect his testimony. "I accept that there are valid criticisms of my conduct in this matter," Mr. Crone said. But he said he had become "the subject of serious allegations which lack foundation."

The committee plans to submit a motion to the House of Commons, inviting British lawmakers to endorse its conclusion about the misleading behavior of the three former executives. Misleading a parliamentary committee isn't a criminal offense—witnesses generally don't testify under oath—but it can constitute contempt of Parliament, a noncriminal sanction levied against people who somehow impede the governing body's work.

The committee said the House of Commons will make a final decision on "whether a contempt has been committed, and if so, what punishment should be imposed." The report didn't say what the punishment would be other than "reputational damage and public opprobrium."

British lawmakers haven't meted out a "contempt of Parliament" sanction to a nonpolitician in more than half a century. The last time it happened, in the late 1950s, Parliament summoned a tabloid editor to the House of Commons to issue a reprimand and hear an apology.

ENLARGE

The report didn't accuse Mr. Murdoch, or his son, News Corp. Deputy Chief Operating Officer James Murdoch—who oversaw News International for four years after Mr. Hinton—of misleading Parliament, but the conclusions did say the father and son had presided over an affair that "demonstrates huge failings of corporate governance."

The committee hit out at James Murdoch's claim that he didn't realize the widespread nature of phone hacking until late 2010, calling it "simply astonishing" given the amount of information in the public domain.

It said his handling of a crucial phone-hacking civil claim in 2008 "raises questions of competence." That Mr. Murdoch approved a roughly £700,000 ($1.1 million) secret settlement in the case without evaluating a key piece of evidence—an email transcript of hacked voice mails—is "astonishing" and indicative of a "lack of curiosity," or "wilful ignorance," the report says.

The report's denunciation of Rupert Murdoch could play into the deliberations of Ofcom, the U.K. communications regulator, which is evaluating whether the owners of British Sky Broadcasting Group PLC are "fit and proper" to hold a British broadcasting license.

News Corp. qualifies as an owner because it holds 39.1% of BSkyB, one of News Corp.'s most lucrative properties. It holds a number of the pay-TV giant's board seats.

Ofcom said Tuesday it is considering the report as part of its evaluation of the broadcasting license. The regulator can revoke a broadcasting license if an owner doesn't meet the loosely defined classification, which takes into account criminality, the propriety of directors and other behavior. Ofcom is unlikely to act before the conclusion of the criminal investigations.

A spokesman for U.K. Prime Minister David Cameron said the government will "consider the report." On the report's assertion that Mr. Murdoch is unfit to run a global company, the spokesman said: "That is a matter for the regulatory authority, not the government, to decide."

The committee generally refrained from making pronouncements on former News International executives who are among roughly 40 people arrested as part of a massive British criminal probe into phone hacking, bribery, obstruction of justice and computer hacking. Those include Rebekah Brooks, chief executive of News International until her resignation last July; Andy Coulson, the News of the World's former editor; and Stuart Kuttner, the tabloid's former managing editor. No one has been charged.

The committee said it would produce a supplementary report when all criminal proceedings finish.

The phone-hacking matter first shot to attention in 2006, when a British court convicted Clive Goodman, the News of the World's royal correspondent, and Glenn Mulcaire, a private investigator, for intercepting the voice mails of aides to the British royal family. The following year, the court sentenced the pair to four and six months, respectively.

News Corp. long said the wrongdoing at the News of the World was isolated to those two individuals—a claim the company later admitted was false. The scandal exploded more prominently last July with the revelation that in 2002 the News of the World hacked the phone of a missing 13-year-old girl who turned out to be murdered.

Tuesday's report criticizes News Corp. for throwing money at both perpetrators and victims to "buy silence" and making "misleading and exaggerated claims" about internal company investigations in a "deliberate strategy to exaggerate evidence in support of the company's innocence."

The report takes particular aim at Mr. Hinton, a British journalist who rose to run News International after decades at Rupert Murdoch's side. Mr. Hinton helmed the U.K. newspaper unit when much of the voice-mail interception occurred. He resigned as CEO of Dow Jones in July.

"Les Hinton was complicit in the coverup at News International, which included making misleading statements and giving a misleading picture to this Committee," the report said. During his testimony before the committee in September 2009, Mr. Hinton "stated that he did not know, could not recall, did not remember or was not familiar with the events under scrutiny a total of 72 times," according to the report. During that testimony, Mr. Hinton said there was no "firm evidence" or "suspicion" implicating any News of the World employees in phone hacking other than Mr. Goodman, the royals correspondent convicted of the practice in 2006. But 2½ years earlier, Mr. Goodman had sent a letter to Mr. Hinton saying phone hacking was "widely discussed" in the newsroom, practiced by others and approved by editors.

In a statement Tuesday, Mr. Hinton said he was "shocked and disappointed" by the report. "I refute these allegations utterly," he added. He said he planned to write to the committee "to object formally."

News Corp. shares rose 19 cents to $19.79 in Nasdaq Stock Market trading Tuesday. "To the extent the Murdochs are forced to run the company in a more investor-friendly manner," investors are upbeat, said Maxim Group analyst John Tinker. He cited the potential to shift some power to Chief Operating Officer Chase Carey, who is popular with investors.

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